A quick one - Australia is proposing a once off flood levy tax of 0.5% for those earning over $50,000 and 1.0% for those earning over $100,000.

While deeply unpopular, it's an extremely elegant tax because it does two things.

1. Funds the flood relief without impacting other government spending. It's also tapping the public for funds like an 'insurance' policy, which is questionable...

The elegant bit:

2. Artificially depresses private consumption for a year. The elegance is that the pressure from the incredible increase in demand for resources to rebuild will put inflationary pressure on prices, but depressing private consumption will also have a miniature deflationary effect. Elegant.

The rub here is that the Reserve Bank of Australia will be less likely to be forced into a corner on having to increase interest rates to a level that puts pressures on people with home loans and debts.

The nice part is that by reducing pressure on debts and home loans is that the rest of the economy not tied up in the recovery isn't punished and you have a lesser likelihood of a two speed economy.

What this shows though is how awkward monetary policy is in modern times, it creates a 'rob Peter to pay Paul' lever that doesn't always work.

While I like the idea of the tax and I think they are a great idea, the selfish side of Richard says 'bah humbug' to all taxes. That said, we've done a great (or poor, depending) job of increasing disposable income. in 1990 you were effectively taxed 47% on every dollar over $50,000. Today it's 45% on every dollar over $180,000...!

If I use my back of the napkin inflation of 3.5% a year, $50,000 in 1990 is 'only' about $103,000 in 2011.